Personal taxation
| Income tax allowances, reliefs
and credits |
2004/05 |
2003/04 |
| |
£ |
£ |
| Personal (basic) |
|
4,745 |
|
4,615 |
| Personal (65 - 74) |
|
6,830 |
|
6,610 |
| Personal (75 and over) |
|
6,950 |
|
6,720 |
| Married couple's (basic) at 10%* |
|
2,210 |
|
2,150 |
| Married couple's (age under 75) at 10% * |
|
5,725 |
|
5,565 |
| Married couple's (age 75 and over) at 10% |
|
5,795 |
|
5,635 |
| Age-related reliefs reduced by 50% of income over |
|
18,900 |
|
18,300 |
| Child tax credit (CTC) family element |
|
545 |
|
545 |
| CTC family element baby addition |
|
545 |
|
545 |
| CTC usually reduced by 6.67% of joint income over |
|
50,000 |
|
50,000 |
| Blind person's allowance |
|
1,560 |
|
1,510 |
| Rent-a-room tax-free income |
|
4,250 |
|
4,250 |
| Pensions earnings cap |
|
102,000 |
|
99,000 |
| Venture Capital Trust at effective 40% (20% 03-04) |
|
200,000 |
|
100,000 |
| Eligible for capital
gains tax re-investment relief |
|
nil |
|
100,000 |
Enterprise investment scheme at 20%
|
|
£200,000 |
|
150,000 |
| Eligible for capital
gains tax re-investment relief |
|
No ceiling |
|
No ceiling |
*Where either claimant was born before 6th April 1935
| Income tax rates |
2004/05 |
2003/04 |
| |
£ |
£ |
| Starting rate10% on first |
|
2,020 |
|
1,960 |
| Basic rate (20% for savings income) 22% on next |
|
29,380 |
|
28,540 |
| Higher rate 40% on income over |
|
31,400 |
|
30,500 |
| Dividends: |
basic rate taxpayers |
|
10% |
|
10% |
| |
higher rate taxpayers |
|
32.5% |
|
32.5% |
| Certain trusts eg discretionary trusts, etc: |
dividends |
|
32.5% |
|
25% |
| |
other income |
|
40% |
|
34% |
Pensions simplification
|
The simplification of the taxation of pensions has
been postponed to 6 April 2006, from
6 April 2005 as previously proposed. The existing eight pension tax
regimes will be replaced by a single regime which will apply to all
tax registered pension arrangements.
The initial lifetime allowance for pension savings will be £1.5m,
rising to £1.6m in 2007 and in stages to £1.8m in 2010.
A 25% tax charge will apply on funds in excess of the lifetime allowance.
If the excess is taken as a lump sum, the total effective tax rate
will be up to 55%. Two types of transitional arrangements will be
available to protect pension rights built up before 6 April 2006.
The initial annual allowance for total contributions will be £215,000,
increasing steadily to £255,000 in 2010. Individual contributions,
which count towards the annual allowance, will qualify for full tax
relief on the higher of 100% of earnings or £3,600, where the
scheme operates tax relief at source.
The maximum tax-free cash will be 25% of the value of pension rights,
subject to transitional relief. The minimum age at which benefits
can be drawn will rise to 55 starting in 2010, although those with
certain contractual rights to draw benefits earlier may do so.
|
Offshore funds
|
The tests for 'distributor' status for offshore funds
will be reformed. The definition of distributable income and the investment
rules have both changed. Individual sub-funds can qualify for distributor
status, even if there are other non-qualifying sub-funds within the
same fund. The changes will be operative from the first accounting
period of an offshore fund ending on or after the date of Royal Assent.
|
Venture capital trusts (VCTs) and enterprise investment schemes
(EISs)
|
The rate of tax relief for VCTs will be increased
from 20% to 40% for shares issued in 2004/05 and 2005/06. The maximum
annual investment will be increased to £200,000. Capital gains
tax deferral relief will not be available for gains invested in VCTs
after 5 April 2004.
The annual investment limit for income tax relief under EIS will also
increase to £200,000 with effect from 6 April 2004. Some other
technical changes have been made to the VCT and EIS rules.
|
Tax rate for trusts
|
The income tax and capital gains tax rate applicable
to trusts will increase to 40% (32.5% for dividends) with effect from
6 April 2004. From the same date the rules regarding the taxation
of loans and other capital payments to settlors will change to ensure
that the settlor is not given credit for more tax than the trustees
have actually paid.
|
Trust tax reform
|
A package of measures to modernise the tax system
for trusts will be introduced from 6 April 2005. There will be a basic
rate band applying to the first £500 of income for all trusts
liable to the rate applicable to trusts.
There will be a new tax regime for trusts for the vulnerable, allowing
these trusts to be taxed on the basis of the vulnerable beneficiary's
circumstances for both income tax and capital gains tax. Certain measures
to protect trusts for the vulnerable will be backdated to 6 April
2004.
Further consultation and work is being undertaken, with the aim of
publishing draft legislation at the time of the 2004 Pre-Budget Report.
|
Immediate needs annuities
|
| Legislation will ensure that from 1 October
2004 payments made under existing and new annuity policies can continue
to be tax-free where they are used to fund the cost of long term care.
|
| The summary has been prepared very rapidly and may contain errors for which we cannot be held responsible. The proposals are in any event subject to amendment before the Finance Act is passed. |
|